After the mystery of Sergio Agüero's injured foot, viewers of the Manchester City Vaudeville tuned in to see if they were witnessing a full-scale, late-season implosion.

On this evidence, the jury is out. Mario Balotelli's and Aleksandar Kolarov's late, late goals rescued a point but the result still allows Manchester United to go five ahead if they defeat Blackburn Rovers on Monday. A further win over Queens Park Rangers next Sunday and City will arrive at Arsenal later that afternoon eight points behind the champions with only seven of their games remaining.

In a week that City scholars may mark down as one when it all went wrong for the Blues, Agüero's crocked tootsie was joined by Balotelli's gate-crashing of an Internazionale press conference before Sunderland rolled up to take a dozing City apart and end a run of 20 straight home league wins.

Martin O'Neill continues to produce sides that should never be written off and the Irishman closed his afternoon with mixed emotions after a fluid display faded as final whistle approached. "Yes. I thought we played brilliantly today and am obviously disappointed to have dropped some points," the Sunderland manager said. Of City's comeback, it was down to "two things really. We are the first team to take some points off them [here, for more than a year].

"And also they are second in the league so they are actually a very good team and they are never out of the match because they have so many match-winners. I think we got a little bit tired, obviously – exertions of Tuesday night, also the disappointment of Tuesday night [losing to Everton in the FA Cup], although we seemed to put that to the side and performed excellently today."

Roberto Mancini had ended the first half like a hyperactive Marcel Marceau. miming his fury at the manner of Sunderland's second goal that allowed them to walk off at 2-1. From a free-kick City were caught dozing, the excellent Stéphane Sessègnon floated in a cross and Nicholas Bendtner buried the header.

The visitors' opener was similarly created by Sessègnon, who would also be involved in their third. From the left, the forward ghosted infield past James Milner and with an effective lay-off found Sebastian Larsson whose side-foot pass beat Joe Hart.

This sparked Mancini's side into action and, in mitigation, they fought back admirably – as they would, too, at the contest's end. The arguments will flare regarding the Edin Dzeko penalty he won when coming together with Craig Gardner and it was also unclear why, after Phil Dowd awarded the spot-kick, he did not offer Gardner the second yellow card that would have reduced Sunderland to 10 men. Whatever, Balotelli stepped up to slot home.

"I genuinely thought that the referee was going to book their player for diving," said O'Neill of the penalty award. "That was my first thought but I should have known better."

Both when the kick was awarded and at a clash of heads between Jack Colback and Micah Richards – who was replaced at half-time with a leg injury, though he should be fine – Sunderland's players fumed at Dzeko. Could O'Neill understand their reaction? "Absolutely." Asked if anything can be done about "simulation", he added: "The referees have a really difficult job, but I spoke to him in the tunnel at the end – I think he must have seen it since – and he just said he thought it was a penalty. I didn't think it was.I think the replays will show that and really disappointing because it was a major blow to us a couple of minutes before half-time.

"I know we scored just after that, but the referee wasn't to know that and he's given it. But anyway it shouldn't detract from our performance – our performance was terrific."

For City, apparent insurmountable disaster struck when Sunderland collected their third: Sessègnon again wandered through City's slumbering midfield before he fed Bendtner's clever cross-field run that splayed the bac-pedalling defence. The Dane's delivery was finished by Larsson for his second, and O'Neill stated of the on-loan Arsenal forward: "I thought Bendtner played as a real centre-forward – holding it up, bringing people in, and maybe on a performance like that his much self-vaunted opinion is maybe justified today."

If this was a reference to the 24-year-old's high self-regard, the introduction of the proven high-class Carlos Tevez – for David Silva, on 58 minutes – did little to help City. And when moments later Balotelli and Kolarov had a very public and embarrassing dispute about who should take a free-kick this appeared to symbolise City's afternoon.

Mancini downplayed this, as any manager ought and, at least, it was both the Italian and the defender who scored to claim what may yet be a precious point.

For Sir Alex Ferguson and his United band, though, they arrive at Ewood Park on Monday evening with the early April spring in their step to which they are so accustomed just as the Premier League trophy is being prepared ahead of its presentation in May. They now have a hand on it.